Detailed system and semiconductor demand analysis for in-vehicle infotainment, telematics and vehicle-device connectivity features.

April 22, 2013 13:58 rlanctot

Pioneering UBI provider Progressive has changed up its messaging around the Snapshot usage-based insurance offering with a new ad campaign in the U.S. built upon the concept of Rate Suckers. The campaign shifts the UBI angle from being a simple means to achieving a discount, to an aspirational model capable of creating an elite group of drivers rewarded with lower insurance rates.

According to a recent Progressive blog, Rate Suckers are the poor drivers forcing up insurance rates for good drivers. And Progressive’s SnapShot is intended to free drivers from the burden of supporting Rate Suckers.

(Link to Rate Suckers ad:

Progressive’s blog states: “Rate Suckers are real, and only Snapshot can stop them.

“You might not know it (63% of those we surveyed didn’t), but you’re paying more for car insurance because of others’ bad driving habits.

They’re called Rate Suckers, and they’re everywhere:
Behind the wheel for breakfast, lunch and dinner. 
Out to play at the strangest hours.
Slamming. On. Their. Brakes. Constantly.
Only Snapshot saves you! It sets you apart, so you can take back the savings you deserve.”

The message from Progressive could not be much clearer and clarity is useful in conveying the Snapshot UBI value proposition. But it is also possible that Progressive is over-simplifying.

The three driving behavior factors most frequently used as part of UBI programs generally are hard braking, harsh acceleration, the amount of driving and time of day. Progressive not only emphasizes hard braking in its blog but also in the functioning of the Snapshot module, which audibly and annoyingly beeps during hard braking.

Progressive’s model emphasizes the avoidance of hard braking and also focuses on taking a “snapshot” of a driver’s behavior – about a month’s worth of driving data – to establish A) whether the driver will benefit and, therefore, qualify for the program and B) the relevant discount.

Progressive is to be admired for its attempt at transparency and simplicity. The Rate Sucker advertising program is clearly intended to discourage drivers who drive a lot, drivers who drive between midnight and 4 a.m., and drivers that accelerate rapidly or brake hard.

Drivers may not agree with Progressive’s definition of the factors that determine safe driving or that lead to lower claims exposure, but at least the company is spelling out the objectives of the program. Drivers that fit the profile can self-select into the Snapshot program and those that do not ought not to even apply – unless they intend to change their driving behavior.

Interestingly, the Snapshot program’s safe driving criteria are antithetical to both the marketing and safety system strategies of car makers. Car makers routinely advertise the handling characteristics of their cars emphasizing both rapid acceleration and deceleration – both of which are shown in ads as the means to avoid hazardous circumstances rather than creating them.

Car makers also use advertising to demonstrate how safety systems can step in and assist drivers who may be distracted. Whether activating emergency braking in proximity to slowing or stopped vehicles or providing lane departure or blind spot warnings for inattentive drivers, the safety systems provide a more forgiving sensor cocoon in the car, with no penalty for the driver.

So all the things that car makers promote – acceleration, harsh braking or even frequent or late night driving - are likely to negatively impact a driver’s insurance rate, particularly if that driver uses Progressive’s Snapshot.  This raises the question as to whether Progressive’s criteria are too simplistic (ie. hard braking and harsh acceleration are not universally negative driving characteristics) or are OEMs promoting bad driving behavior either via their advertising or via the implementation of forgiving safety systems.

A driver who brakes harshly to avoid a collision with another driver that has made a driving error will want to be rewarded, not penalized. Similarly, a driver that accelerates to bypass a dangerous driving circumstance will also expect positive, not negative, feedback.

Progressive benefits from a simplistic message and a simplistic approach to UBI, but there is nothing simple about driving a car.  Progressive’s approach over-simplifies the proposition and ignores the fundamental nature of UBI in particular and telematics in general vis-à-vis auto insurance.

Progressive is adding thousands of Snapshot users every month, suggesting a respectable degree of success with the simplistic approach.  But the opportunity remains for competitors to deliver a more nuanced offering recognizing real-world driving behavior and leveraging, more broadly, the vehicle connection.

State Farm’s In-Drive offering, for example, delivers a broader functional portfolio including vehicle diagnostics, hazardous driving alerts, and a wider array of real-time vehicle and driving information. In fact, among the many UBI programs on the market Progressive stands out for the lack of added-value customer engagement.

Telematics has the ability to alter key aspects of the insured/insurer relationship around such issues as first notice of loss, timely claims processing and value-added services. If insurance telematics solely focuses on lower rates it is unlikely to have a lasting disruptive impact on the industry.


April 14, 2013 13:28 rlanctot

Usage-based insurance is a consumer deception. It is a shell game being foisted on consumers to lure them into allowing their car insurance company to glance over their shoulder as they drive and determine their insurance rate based on direct observation of their driving behavior.

UBI programs will no doubt be the focus of the upcoming Insurance Telematics Europe 2013 event in London May 7-8. The focus on UBI at this event is appropriate as the UK remains a source of critical leadership in bringing UBI to the mass market, something that has eluded all other geographies, including the U.S.

The failure of UBI programs to capture the imagination of the consumer lies in its deceptive quality.  The deception lies in the assumption that insurance companies know anything about what constitutes safe driving. But it is actually worse than that, because insurance companies are only allowed to use a limited set of data, depending on the regulatory jurisdiction, to draw their underwriting conclusions.

The attraction of usage-based insurance, or UBI, is that it is a potentially superior tool for determining rates than the existing models derived from driving history, credit scores, and demographic data.  UBI is also attractive to insurance companies trapped in a low growth increasingly low margin industry, because it allows them to draw away the lowest risk drivers from competitors while giving longer term customers a reason not to change.

Regulatory authorities and governments also like UBI programs because the participants tend to drive less, reducing congestion, carbon emissions and the potential for collisions and expensive claims. For young drivers or drivers with poor driving histories UBI programs, allowing remote tracking or monitoring, may be the only means of obtaining affordable insurance.

Strategy Analytics' own research has shown the highest level of interest in UBI programs among younger demographic segments in Europe and the U.S.  (Consumer Interest in Usage-based Insurance -

In Europe, where regulators have banned gender bias in car insurance underwriting, UBI may be an attractive work-around. And pay-as-you-drive programs based almost entirely on mileage, have also emerged for drivers who simply don’t drive much and, therefore, shouldn’t have to pay the same rates as those who drive more.

But the shortcomings of UBI programs are many and those shortcomings have limited the adoption of the technology to a few million users globally. At the core of consumer resistance is the surrender of privacy inherent in allowing the tracking of driving behavior. For the customer, UBI can be a crap-shoot – a 50-50 proposition that participation will actually produce a meaningful discount.

The offered discounts range from 5% just for the initial participation to as much as 40% based on the results of the tracking analysis. But some drivers will not qualify for any discount which can create a quandary in the event of a program using a tracking device that has been permanently installed (as opposed to an easily removed OBDII plug in), or in the case of a dealer or car OEM brokered offer that produces no discount. In the event of the former case the device may have to be uninstalled at a cost to the consumer, and in the latter case the customer may harbor bitterness toward the car maker or dealer.

But the basis for the discounting is specious. The most commonly cited factors are mileage, acceleration and hard braking. Some country and state regulators have banned the use of speed information for rating and we have already noted the restrictions on gender in Europe.

A recent conversation with a BMW executive had me questioning the entire UBI proposition. BMW will never participate in UBI offers, he said, because penalizing drivers for hard braking or acceleration is antithetical to BMW’s vaunted “ultimate driving” experience.  If BMW drivers participate in UBI programs and are, therefore, discouraged from hard braking or acceleration by their insurance companies, it undermines many of the pleasurable principals of driving a BMW in the first place.

But this is not just a BMW issue. An executive for a large multinational insurer recently questioned – in a personal conversation – the relevance of “hard braking” as an underwriting criterion.  Sometimes hard braking is a life-saving decision or an effective or appropriate reaction to an urgent or dangerous driving situation.

Many drivers have described to me the potentially harmful result of being forced to think twice or three times about accelerating or braking because of the presence of the tracking device on their car.  And I have yet to find a driver that is fond of the annoying beeping sound emitted by Progressive Insurance’s SnapShot device during what the device determines to be a hard-braking moment.

The Solution

My brother was visiting me recently and I told him about the tracking device I had installed in the OBDII port of my car for the purpose of qualifying for a lower insurance rate. His immediate response was: “Why don’t they just use your phone?” With those words my brother captured the very crux of the barrier between a potentially user friendly solution capable of empowering the customer and an annoying and invasive offering fraught with frustration and built to produce disappointment.

The most prevalent UBI offerings around the world require an OBDII plug in that attaches to the diagnostic port available on most, though not all, cars around the world. While the device and the port into which it is to be inserted are relatively simple to understand, the process is not user friendly.

Getting the device to the consumer generally requires the delivery of a product that has been programmed to work with the specific brand, model and year of vehicle to be insured. The hardware may be the same, but the software is not.

The process also assumes that the consumer will be able to locate the OBDII port, also a relatively simple exercise, but not very user friendly given the normal requirement of peering around under the driver’s side of the dashboard. OBDII ports were conceived to enable service technicians to attached diagnostic devices, not for insurance companies to track driving behavior and vehicle performance.

But that is just the hardware side of the proposition. Getting to the delivery and installation of the hardware device assumes that the consumer has accepted the proposition of sharing his or her data with the insurance company and, for that matter, any marketing partners with whom the insurance company may have hooked up.

Actual ownership of the data in most cases appears to lie with the insurance company. And the legal implications of that data ownership are less than clear in the event of an accident. As my disclosure statement states: “You release (the provider of the UBI device and service) and (the insurance company) from any liability associated with the disclosure of information gathered through (the UBI program).”

The problem at the core of the UBI value proposition is twofold: privacy and data portability and ownership. Many consumers have discovered that staying with a single insurer for too long – with a clean driving record and a related low rate – can make switching difficult. The new insurer won’t have access to the claims (or lack of claims) history that has produced such a low rate and will be, therefore, unlikely to match that rate.  This is different in the UK where claims history is centrally available. (Lesson #1 – you ought to switch your car insurance occasionally – or often? – to ensure you obtain the best rate.)

Carriers in the UK have been creating apps to enable consumers to get a preview of their potential UBI discount, but these apps do not solve the problem of complete consumer data ownership.  The very concept of consumer ownership of driving history data has yet to be seriously presented as a value proposition by either insurers or wireless carriers.  Perhaps with data ownership individual consumers could specify which driving attributes they care to share.

Data portability is the proposition that is actually being enabled by UBI programs but it is a concept that few insurers are embracing. In an ideal world, a customer that has gone to the trouble of installing a tracking device on his or her car ought to have ownership of the resulting data and the ability to take that data to another carrier for a competitive quote.

Here, the UK is taking the lead. Just as UK car insurers have led the way in UBI programs intended to defeat rampant fraud, and just as Norwich Union in the UK was one of the first insurance companies to use the Progressive approach to UBI insurance, an emerging insurance industry service provider in the UK, Ingenin, is poised to disrupt the entire insurance industry, not just car insurance.

Perhaps not surprisingly Ingenin’s plan revolves around leveraging the smartphone and all of its sensing capability for determining driving behavior along with a lot of other usage information that may be relevant for other forms of insurance as well. In fact, Ingenin’s proposition not only provides a platform for tracking driving behavior it enables the capture and delivery of information for roadside assistance or crash investigations.  And the Ingenin vision also calls for alerting drivers to known hazardous conditions or accident hotzones in real-time via the smartphone.

Even more significant, Ingenin is seeking to leverage voice and facial recognition to tie the insurance to a particular driver not just to the vehicle. Ingenin has yet to announce a major partner. In the meantime, the company is continuing work on bringing its vision to life.

In the end, it may take the use of the driver’s smartphone to deliver a personalized, empowering, and portable insurance proposition capable of transforming UBI insurance into a mass market phenomenon. Consumers are much more comfortable with and accepting of sharing their personal information via their phone – something they are consciously or unconsciously doing every day.

Nothing about current UBI programs is user friendly. In fact, everything from the hardware and software to the disclosure statements and privacy surrender are fairly hostile and opaque.  The use of smartphones as in the case of Ingenin can change all that.

March 31, 2013 22:30 rlanctot
At a time when governments around the world are raising gas taxes to discourage driving and fund the maintenance and expansion of transportation infrastructure, the state of Virginia (my home) and Maryland (right next door) are proposing to reduce or eliminate retail gas taxes.  The proposals are a part of elaborate funding schemes intended to resolve financial shortfalls associated with local transportation initiatives, but the blindingly obvious folly cannot pass without comment.
At the core of the debate which, in Virginia, will come to a vote April 3rd, is the apparent severing of the transportation funding source from the greatest users of the resource via the gasoline tax.  This separation is important because, almost unspoken as part of the refinancing plan, is the fact that the existing billion-dollar-plus funding shortfall is growing as cars become more fuel efficient, people (in some cases) drive less and hybrid and full-electric vehicles catch on with consumers.
The shift to more fuel efficient vehicles has failed to reduce congestion (or highway fatalities), which is why funding for public transportation is part of the funding equation.  This is another source of ongoing and unresolved controversy – the diversion of highway funds to public transport.  Some feel strongly that buses should be given priority for this funding, others believe that public-private partnerships are the answer.  (Rail-oriented solutions are exceptionally unpopular in some circles due to high costs and perceived inefficiency.)
While fuel taxes around the world have skyrocketed, transforming driving behavior, retail fuel taxes in the U.S. have remained low and fixed. (See attached table.)
Virginia: Virginia is proposing to eliminate the retail gas tax, add a 3.5% (emphasis mine) wholesale tax on motor fuel (backup plan of 5.1% tax in case of shortfall); increase the sales tax on non-food items to 5.3% from 5%; dedicate more general fund revenue to transportation; increases sales taxes to 6% in Northern Virginia and Hampton Roads with revenue to go to transportion; double the annual fee for alternative fuel vehicles to $100 from $50 – since amended to $64/year.  (There are also provisions for a reduced motor vehicle sales tax and a reduction in a hotel occupancy tax.)
Maryland: Maryland is proposing to reduce the retail tax of gas by 5 cents to 18.5 cents and then index it to the Consumer Price Index; impose a 2% wholesale tax on fuel to be increased to 4% in 2014 (backup plan of 6%); index transit fares to CPI.
Both Maryland and Virginia are seen as appealing to consumers by reducing the gas tax.  But the shift to a wholesale tax looks like simple sleight of hand.  The strategy also goes against the findings of the Metropolitan Washington Council of Governments’ Transportation Planning Board study on the “Public Acceptability of Congestion Pricing” which found participants most accepting of maintaining or increasing gas taxes.
The TPB study gathered consumers and brainstormed around three potentially congestion-reducing scenarios:
1.      Priced lanes on all major highways
2.      Pricing on all streets and roads – ie. a road use tax based on GPS readings
3.      Priced zones – likely enforced with license plate readers
The study found the most support for priced lanes on all major highways and the least support for a road use tax enforced by an on-board device. (See attached table.)
The results are interesting because a rod use tax is the most often suggested alternative to the gas tax.  Some high profile tests have been conducted in The Netherlands and in the state of Oregon in the U.S.  Taxing road use directly is seen as an ideal funding mechanism since it accounts for alternative fuel vehicles that let their owners avoid the gas tax.
In fact, the state of Virginia clearly has alternative fuel vehicles in mind when it is proposing increasing the annual fee for electric cars.  Here, too, the Virginia approach is counterproductive and counter intuitive since it discourages the use of vehicles that are meant to reduce both harmful emissions and dependence on foreign oil.
The TPB study further uncovered the fact that consumers – after participating in the TPB forum - were not so opposed to gas tax increases. (See attached table.)
Participants in the TPB forum also opposed the perceived tradeoff between road use taxes and lower gas taxes. (See attached table.)
The rejection of the road use tax appeared directly tied to the required hardware – a GPS added to a vehicle.  The objections expressed included focused on concerns about privacy, complications and impracticality.
These findings have significant implications for the UBI development efforts in the insurance industry.  Insurers also want to mount devices on vehicles – usually using the OBDII diagnostic port, although sometimes via other means.
The Federal government is funding UBI program trials in the hopes of leveraging these programs for their ability to reduce the amount of driving overall and, thereby, emissions and congestion.  But overcoming the objections to privacy concerns and the complexity of device installation may be being underestimated.
Still, Strategy Analytics’ own survey of consumers in Europe and North America found a significant level of interest in the programs – even though participation rates remain low. (See attached table.)
Having visited Dallas last week I can say that it appears that the North Dallas Tollway Authority has figured this issue out in favor of Scenario 1 from the TPB study.  Most major roads in and around the area have an array of tolls intended to manage traffic using a combination of toll-tags and license plate scanners – and no tracking devices.
Transportation authorities are facing multiple challenges including:
1.    Reducing congestion
2.    Reducing emissions
3.    Increasing revenue for maintenance, infrastructure and public transportation
Gas taxes have been the preferred funding option around the world because it is a direct tax on the consumers of the resource.  The emergence of alternative fuel vehicles poses a significant challenge to future funding models.
While politicians may debate the merits of financing public transportation projects with funds derived from the use of highways, the rationale that public transportation increases the overall capacity of the network is reasonable.  It is also understandable that states may wish to charge a user fee for alternative fuel vehicles, as Virginia currently does, but this runs counter to the objective of encouraging the use of these vehicles (subsidized by Federal and/or state tax deductions, etc.).
The TPB findings that consumers are receptive to higher gas taxes and tolling point the way to an equitable resolution of the funding challenge facing the U.S.  And concerns regarding privacy are likely to create barriers to the wider acceptance of both road charging and UBI insurance. 

March 28, 2013 10:11 rlanctot

Telematics systems can do a lot of things these days, but one thing they cannot do is see to it that family members of unconscious crash victims are contacted in a timely manner after a crash.  Car makers are fond of touting Twitter and Facebook integrations in the car, but nearly two decades of work have failed to solve the problem of next of kin notification.

Good news is arriving from the West Coast of the United States.  Legislation has been introduced in the California legislature by Senator Curren Price and Assemblyman Steve Fox to ensure law enforcement personnel can notify next of kin quickly in the event of a traffic incident in which victims are incapacitated.  Action is expected in April.

It is wise for consumers, auto makers, emergency responders and law enforcement representatives in the U.S. and around the world to take heed.  Given the influence of past legislation in California on automotive-related issues such as vehicle emissions, it may well be that California finally resolves for the global auto industry an issue that has plagued crash responders for decades – crash victim identification and notification of next of kin.

The California Motor Vehicle Emergency Contact Locator Act of 2013 (AB 397) solves this problem.  Its passage will create the nation’s first VIN Emergency Contact Locator (VIN ECON) database which will be accessible to authorized law enforcement agencies nationwide.  Such a database will serve as a model to be emulated around the world.

The legislation arrives at a time in the automotive telematics marketplace when car makers have all but moved on from the focus on safety and automatic crash notification that gave rise to embedded vehicle connections in the first place.  Car makers today are distracted with smartphone app integrations and vehicle relationship management.  The life-saving capabilities of telematics systems have been all but forgotten or at least taken for granted.

Each telematics service provider collects emergency contact information linked to the VIN at customer provisioning.  They store the emergency contact information in a database silo which is only accessible by the TSP. 

The TSP safety innovation of the California legislation is that it established a centralized emergency contact information database (VIN ECON) at a national law enforcement  telecommunication center that will aggregate and link the silo-ed databases so that law enforcement representatives will have immediate access to the data.  In fact, the database will backstop the telematics system in case the system fails to contact the TSP.

Some in the industry assume that once the embedded modem is connected to a call center, the well-being of crash victims is assured.  And there are touching stories of OnStar call center representatives contacting family members and connecting them with crash victims at the scene of the event. 

But these stories obscure the reality of an unconscious crash victim at the scene of the crash unable to communicate his or her identity or desires at the scene of the collision.  Valuable time and, sometimes, lives are lost as a result.  Without a nationwide database to aid responders, there is little that can be done to reach out for help and certainly not in a timely manner.

The idea for AB 397 was originated by L.A. Councilmember Dennis Zine in response to a 2007 car crash in the San Fernando Valley involving the death of a 72-year-old mother from Paso Robles.  The bill is co-sponsored by the City of Los Angeles and the non-profit organization We Save Lives, founded by Candace Lightner (also the founder of MADD).

Additional support for the creation of the database has come in writing from such organizations as the Association of Public-Safety Communications Officials-International (APCO), the International Association of Chiefs of Police (IACP), the International Association of Fire Chiefs (IAFC), the Governors Highway Safety Association (GHSA), the National Association of State EMS Officials (NASEMSO), and the National eHealth Collaborative (NeHC), which specifically supports AB 397.

Instead of taking hours, or even days, the bill will ensure the swift notification of family members who can then better assist law enforcement officials in identifying incapacitated crash victims and aid health care representatives in the care of their loved ones.  “This is a targeted, common sense approach to an important public safety issue,” in the words of Lightner.  “It is unacceptable for families and crash victims to suffer because of lack of adequate or seriously delayed notification.  We must ensure that law enforcement officials have the resource necessary to quickly access a motor vehicle owner’s emergency contact information that will help save lives and alert family members in the event of a tragic crash.”

Lightner’s sentiments echo those of GM’s former vice chairman, Harry Pearce,  at the conception of Project Beacon, which went on to become OnStar.  He asked, at the time, how many crashes would have to occur with no timely emergency response before GM would recognize the obligation it had to provide for automotic crash notification. 

It was only later that OnStar stumbled on the challenge of identifying crash victims and the need to notify next of kin.  OnStar executives quickly discovered they had a real problem on their hands in the event of unresponsive crash victims – a problem that the OnStar service could not solve.

Telematics service providers generally gather motor vehicle owner emergency contact information at the dealership during the service registration process, but there is no means for sharing the information with law enforcement without the customer’s consent – which can’t be given if the customer is unconscious.  More importantly, the information is not stored in a centralized law enforcement-accessible database.

In a similar vein, eight states in the U.S. have next of kin databases based on driver’s license information, but each of these databases is silo-ed and not nationally accessible.  Furthermore, these driver's license systems require law enforcement officers to physically locate the driver's license at the scene of a crash, which is typically not possible in the most horrific of crashes.

In the words of one of the bill’s sponsors, Steve Fox: “The Motor Vehicle Emergency Contact Locator Act is important to drivers and emergency medical care providers.  The fact that this law can assist doctors by allowing them to have timely access to family members and to obtain additional information such as the victim’s medical records and medical directives will save lives.”

Fellow sponsor Curren Price added:  “The agony of not knowing if a missing relative is injured or alive or dead cannot be overstated.  This bill will go a long way to addressing the heart-wrenching issue.”

Research has produced advances in telematics such as enhanced automatic crash notification – capable of alerting first responders to the severity and nature of a crash to determine the appropriate emergency response.  But responders face a real challenge in identifying victims who have been incapacitated.

The simple process of creating a centralized VIN ECON next of kin database capable of closing this loophole will save lives and give family members much-needed peace of mind.  Equally important, it will save time and effort on the part of emergency responders, which in itself may save lives.

The best news of all is the fact that the database will be created and maintained by public authorities.  There is no burden on the automotive industry or automotive dealers, since dealers are already gathering the information.  The gathering of next of kin notification information will, now, no longer be a pointless activity.  With passage of the bill and creation of the database the consumer – and the dealer and the auto maker and emergency responders – can rest assured that law enforcement personnel on the scene of a crash will be able to more quickly determine the identities of drivers and passengers and notify relatives.

In the end, the VIN ECON is really a low-tech, low-cost solution to an urgent challenge.  It requires no hardware or software to be created by car makers or dealers, it simply ties together existing information resources and makes that information accessible to the appropriate persons under specific and restricted circumstances.

March 17, 2013 12:50 rlanctot

Returning to Brazil for the first time in a few months I was struck at the paucity of technology in the taxi cabs. Having recently been at the Consumer Electronics Show in Las Vegas I was accustomed to everything from smartphones and GPS devices to cameras, sensors, backseat advertising displays, and payment terminals in cabs. Suddenly, in the land of the vehicle immobilization mandate (Contran 245) I was confronted cab after cab with nothing but a dispatcher and fare machine.

That is, until yesterday in my cab ride from Garulhos Airport in Sao Paulo.  According to the driver, the taxi that took me and my wife to our hotel was part of a 500-cab trial of a backseat tourist aid that was a real revelation and nothing I had seen anywhere before.

Put together by a local company, Comtecno, for the Brazilian Ministry of Tourism (and also available in Recife, where the World Cup with be contested), the device was a Samsung tablet computer equipped with cellular connectivity.  Comtecno calls the device the Multitoky Mobile and the company has as its goal deployment at 14 Brazilian airports for a total of 12,000 devices.

The tablet was unobtrusively strapped to the back of the cab driver’s seat, and I wouldn’t have noticed except for the fact that I am on the constant lookout for in-car tech.  The device charges while in the pouch and its use requires no assistance from the driver.

I immediately grabbed the device, figured how to open the browser and accessed a couple of email accounts.  Before long my wife and I were checking out local tourist attractions and restaurants and peppering the driver with questions.

“Do people like it?”


“Do you ever use it yourself?”


“How do passengers use it?”

“To help tell me their destination.”

“Do customers have any complaints?”

“The connection is slow.”

“Will it play video and audio?”


With only 500 cabs as part of the test it was not surprising that the only overt advertising on the device appeared to be public service announcements warning tourists against sex tourism and people trafficking.  Coming in to Sao Paulo one could imagine a few more pointed warnings, but overall the device was a true joy to discover in the rear seat of our cab and a promise of future innovations to come.

Given the relatively high crime rate and the country’s position as have the third highest number of highway fatalities, one could argue for the implementation of cameras for anti-theft and fraud, along with sensors for maintaining vehicle distance in traffic.  But, generally speaking, the cab drivers are some of the best drivers in Brazil.  (A good contrast is China where there is little respect for lanes, let alone other vehicles.)

But if a Samsung tablet in the rear seat – tethered by a security link – is a first step on the path to vehicle connectivity in Brazilian taxi cabs, it is highly welcome.  It is far superior to the annoying embedded backseat advertising displays found in Las Vegas, New York City and Shanghai, among other cities. 

The rotating messages on these backseat screens are entirely without any merit as far as helping to educate either visitors or locals regarding popular local businesses or for providing informational traveler alerts.  Anyone who attended CES in Las Vegas is likely sick and tired of hearing Steve Wynn tout his gambling properties – a fact reflected in the reflexive tendency of most cab drivers to try to at least turn off the volume on the device even if they could not stop the video.

Kudos to Comtecno and the Brazilian Ministry of Tourism and the for conceiving a creative solution for connecting with tourists.  The next step will be to enable all types of transactions, including perhaps paying cab fares.  Of course, Brazilian cab drivers are still talking on their mobile phones too much and, occasionally, watching video both while parked and driving.  Oh, well, they can’t get everything right all at once.

March 9, 2013 21:58 rlanctot

I have frequently expressed skepticism regarding the mass market potential of usage-based insurance and nothing about my experience with State Farm's DriveSafeandSave program has changed that viewpoint.  At a gut level, consumers tend to resist surrendering their privacy to participate in such a program.  Of course, younger demographic segments, including those surveyed by Strategy Analytics, have shown a unique willingness to surrender that privacy in exchange for economic value – ie. an auto insurance discount.

There is no question that there are pockets of consumer interest in UBI insurance especially where auto insurance rates are either universally high due to prevailing market conditions or prohibitively expensive for particular drivers.  To the extent that competitive forces fail to suppress insurance rates, UBI programs can become the only route to finding a lower premium.

This brings me to the more fundamental obstacle to widespread acceptance of UBI insurance: trust.  One of the advantages of UBI insurance that is frequently touted by analysts is its ability to change the customer relationship by increasingly the frequency of customer interactions and enabling a higher degree of transparency around the determination of the customer’s insurance rate.

The problem is that few insurance companies are set up to take advantage of this new customer service paradigm.  The industry is built around infrequent customer contact in order to minimize the unpleasantness of policy renewal or the filing of a claim.  This fact was brought home to me recently when I explored a UBI offer from my own insurance company, State Farm.

State Farm has more than 20,000 independent agents selling insurance nationwide.  Normally this is considered a huge market advantage, which is reflected in the fact that State Farm is one of the largest, if not the largest, auto insurer in the U.S.

My agent sent me a letter offering a 5% discount if I were to sign up for the company’s DriveSafeandSave program.  DriveSafeandSave is approximately two years old, but as with most such programs it has taken time for State Farm to secure state-by-state regulatory approval for the program.

DriveSafeandSave was made possible in large part by a cooperation with Hughes Telematics which supplied its In-Drive module – an OBDII plug-in – to enable the program.  But DriveSafeandSave also allows drives of Sync-equipped Ford’s or OnStar-equipped GM vehicles to participate via those devices.

The beauty of taking advantage of the offer being made to me by State Farm is the fact that State Farm already knows my driving history and the driving history of my entire family, all of whom are insured by the company.  This means, State Farm can offer me the 5% discount immediately without any need to conduct any credit or driving history check requiring the onerous process of filling out forms and answering probing questions.

I know about the potential complexity of pursuing the second route – evaluating alternative carriers – because I did submit information for quotes but quickly realized that get a precisely equivalent offer I not only had to include my homeowner’s coverage but would also have to spend a lot more time digging into the details of the different offers – which, by the way, have been pouring in.

So I contacted State Farm to ask about the DriveSafeandSave program and, for the first time ever, spoke directly to my agent.  For as long as I can remember I have only interacted with one of his assistants.

Surprisingly, my agent pleaded ignorance of the DriveSafeandSave offer in spite of the fact that the letter I had received in the mail had his signature on it.  At this point my agent told me that I must be talking about the box that was sitting on his desk.  Evidently an In-Drive device had been sent to him to perhaps use on his own car.

I immediately explained to him how UBI insurance worked generally along with what I knew of the DriveSafeandSave program.  He was genuinely interested and promised to follow-up.

By now you may be beginning to understand what I am talking about regarding a new customer service paradigm.  Insurance companies are essentially getting into the consumer electronics business, with all of the customer service and support implications that that implies.

Consumers will need help installing the device, understanding how it works, understanding their privacy rights and understanding the scope of the insurance company’s right to use their personal information.  In that regard, I received a phone call a couple days later from my agent’s assistant who wanted me to sit through a reading of the program’s user agreement and privacy statement and agree to all of its terms.

Thankfully, the assistant agreed to email the document to me after I had agreed to all of its clauses (see below).  Based on my indicated wishes, I should have, by now, received at least three In-Drive devices to affix to my cars – but more than two weeks have passed and I am still waiting.

The issues at stake in this new customer relationship are, therefore, not limited to trust.  Another key issue is expectations.  I am expecting to see devices show up at my home to be installed on my cars by me, after which I will be able to access the driving information of all of the correlated vehicles online.

I am still waiting and the longer I wait the more my trust is being undermined and my expectations unmet.  I am also waiting to see a clear statement reflecting the 5% discount in my aggregate premium.

There is no doubt that UBI insurance has the potential to alter the course of the insurance industry providing a tool to enable more accurate underwriting.  But as long as carriers remain mired in old customer relationship patterns they are not likely to reap the full rewards of UBI offers and the program will remain a niche offering for desperate customers like me seeking to insure young drivers.

The good news for my agent is that he has by now received from me several reports and blogs written on this subject and so, better than most State Farm agents, he now knows what this new program represents – ie. a chance to reach out and snatch customers from competing carriers.  With any luck he has installed the In-Drive module on his own car so that he can better understand and explain the technology and the service to his new and old customers alike.

User Agreement:    

(From the email message: "You have requested to enroll in the Drive Safe & Save with In-Drive program.   I must get your consent to the following: ")                                    

- You have the full right and authority to provide consent on behalf of all   

Named Insureds on the policy and the owner(s) or lessee(s) of the vehicle.  

- You understand and agree that Drive Safe & Save will impact the premium for 

the vehicle and any renewal, transfer, reinstatement, amended, substitute or

replacement vehicle unless a new consent is required by State Farm or until 

participation in the program is discontinued.                               

- You understand that if you are currently receiving a premium reduction for  

low estimated annual mileage as reflected on your policy renewal notice or  

declarations page, your premium may increase at a future renewal if the     

calculated annual mileage no longer fits those criteria.                    

- You understand your Drive Safe & Save discount amount may be adjusted at    

each renewal based on the collected driving information.                    

- You are or intend to be a Hughes Telematics, Inc. (HTI) In-Drive subscriber 

by installing the In-Drive device into the enrolled vehicle. You understand 

that if you do not install the device within 30 days, you will not be       

eligible for Drive Safe & Save.                                             

- You authorize HTI to provide State Farm with mileage and other vehicle usage

information, such as how, when, and most common areas (approximately 40     

square miles) the vehicle is driven.                                        

- You understand that the device you receive from HTI as an In-Drive          

subscriber must remain installed in the participating vehicle for you to    

remain eligible for the program.                                            

- You understand that you may not be eligible for the program if you cause    

State Farm to receive inaccurate data for the participating vehicle.        

- You understand the insurance premium as it relates to annual mileage will 

be based on vehicle miles driven as reported by HTI instead of estimated    

annual mileage. Also, you understand that other vehicle usage information 

obtained from HTI can impact your premium.   

- You authorize HTI to verify the status of your In-Drive enrollment and to   

provide information from the vehicle to State Farm.                         

- You authorize State Farm to share your contact and other policy information 

with HTI to facilitate your participation in Drive Safe & Save.             

- You release HTI and State Farm from any liability associated with the       

disclosure of information gathered through Drive Safe & Save and In-Drive.  

- You understand that any Named Insured can discontinue participation in the  

State Farm Drive Safe & Save at any time by notifying your State Farm agent.

- You will inform your State Farm agent if you are no longer an HTI           


- You will inform HTI and your State Farm agent if the vehicle is sold or     

transferred to a new owner or lessee. You will remove and return the In-Drive

device before the vehicle is transferred.                                   

Do you consent and wish to enroll in Drive Safe & Save?          Y       

Does the customer need a telematics device?      Y        (Y/N)       




March 3, 2013 13:35 rlanctot

When visiting Shanghai a couple months ago I was struck by the fact that multiple auto dealers visited during my stay did not have cars available with activated telematics systems.  This meant that the dealer was not able to demonstrate the technology to customers virtually guaranteeing consumer apathy.

This past week I was visiting car dealers in Italy and discovered a new barrier to consumer adoption, cars without power in the showroom.  Now I am the first person to acknowledge that consumers put a greater emphasis on style, drive and price than they do on infotainment and telematics (see attached slide), but cars without power in showrooms seems absurd in an age when the electronic and software content in cars is on a steep rise relative to the value of the vehicle.

These incidents were shocking to me because I experienced the telematics disconnect in multiple dealers in China (FAW Toyota, Nissan, BMW) and the power failure in multiple dealers in Italy (Fiat, Volkswagen, Hyundai).  The Chinese experience was exceptional because in the past I have had successful telematics demonstrations at Buick, Cadillac, Toyota, Lexus and Roewe dealers.

At the time of my visit to Shanghai, the dealer said that there was only one BMW in all of Shanghai that had telematics service provisioned for the purpose of providing a customer demonstration, but that vehicle was located on the opposite side of town.  The Nissan and FAW Toyota dealers simply had not activated any of their cars.  The only similar experience from my past was with Roewe’s Inkanet-equipped 350 which was most often lacking power on the dealer floor because the Android-based infotainment system had drained the battery.  (Roewe eventually installed Inkanet demonstration kiosks with their own power.)

The experience in Italy was surprising for the manner in which it was discovered.  The hatchbacks of many of the cars – which close electronically – were all ajar, not completely shut.  The natural instinct when one sees a door that is not fully closed is to give it an added shove or open and close it again.

Attempts to close these hatchbacks brought either a panicked or slightly amused response from the dealer sales person who had to explain that the hatch was powered and, when left on, tended to drain the battery in the showroom rendering the feature useless and the hatch not “closable.”  Usually the dealer had taken the added measure of wrapping paper or cardboard around the latch to prevent damage from customers trying to slam the hatches shut.

Is this problem emerging because cars are sitting too long in showrooms unsold?  Are dealers trying to avoid paying steep electric bills?  Not likely.

What is more likely is that dealers simply consider the electronics in the car to be a low priority, a fact that is borne out by Strategy Analytics research ( - Vehicle Purchase Behavior and Priorities of Chinese Consumers).  They have either reached this conclusion on their own in reaction to customer behavior or they are responding to a lack of auto supplier focus on selling sophisticated infotainment systems.  The danger, of course, is that dealers are following the lead of the factory.  If OEMs are not making a priority of infotainment systems then low attach rates and low customer satisfaction scores will result - ie. a self-fulfiling prophecy.

It may also be that dealers don’t want to engage in resolving consumer confusion regarding smartphone connections, voice recognition, navigation systems and apps.  Years ago Fiat was touting Blue&Me with point-of-purchase materials throughout much of Europe, but Blue&Me signs are no longer present in Fiat dealerships in Italy.

The picture is even more complex for Fiat, given the presence of Garmin, TomTom, and Magneti Marelli/Wind River navigation system options on its cars.  But Volkswagen has a growing range of infotainment options, as well, none of which could be demonstrated at the dealer visited in Italy.

The one exception encountered during this brief dealer tour was Hyundai.  Hyundai had a large sign touting the special edition of its i20 with a Pioneer infotainment system (the Aha Radio) enabling connection to a customer’s iPhone to access content and applications.  The dealer opened the hood to engage the battery to enable the demo, which amounted to a self-demo of the system which paired quickly and streamed audio via the supplied cable.

The sad reality is that solutions exist for both the telematics system provisioning problem in China and the power failure in Italy.  But the message is clear.  Selling infotainment and telematics systems introduces a new challenge to the process of selling cars – calling attention to power requirements, user interfaces, smartphone connections and apps.

Car makers from Ford and GM to BMW and Hyundai have introduce special dealer training programs and even Apple-like genius bars to bring customers – and dealers – along on the technological journey.  Clearly more guidance and support are needed if the industry is to achieve success with connected cars.  But making sure cars in showrooms are powered and that embedded telematics systems are provisioned seems like pretty basic stuff at this stage.


March 3, 2013 11:25 rlanctot

Tweddle set out more than five years ago to shift its printed manual business into the digital world.  That step has led the company to the development of vehicle relationship management solutions, a content and application delivery platform and, most recently, the ability to handle software over-the-air updates to cars.

Tweddle has learned quickly that vehicle connectivity is an all-in proposition.  Once connected to the car, either via an embedded modem or interfaced smartphone, the owner, dealer and car maker relationship to the vehicle is permanently altered.

Enabling a digital manual experience in the car – including static images and video of vehicle systems – not only needs to be VIN (vehicle identification number) specific, it also needs to be kept up to date.  It also means that the dealer and the OEM need access to that VIN-specific vehicle information.

This means that the VIN specific information must be accessible and updatable, which means it must be stored on an off-board server.  And it means that there must be a capacity for synchronizing on-board and off-board information.

But understanding these needs and realizing them in an implemented solution in a production vehicle are two very different things.  Achieving that objective has brought Tweddle into the fully connected vehicle world where the company is now processing streaming audio, delivering apps and software updates, and exchanging vehicle data.

Tweddle’s capabilities have somewhat outrun its client base as the company is prepared with solutions intended to stitch together the car, the customer, the dealer and the manufacturer, but the full circle experience has yet to be fully realized.  Closing the loop with drivers and dealers is essential for extracting the full value from vehicle connectivity which includes higher customer satisfaction scores, customer retention and additional vehicle sales.

The cornerstone of Tweddle’s value proposition – its intellectual property – is built around its foundational understanding of vehicle information enhanced with digital delivery and ubiquitous access.  Tweddle may have started years ago with manuals and dealer diagnostic systems, but the current solution has a wider scope.

Tweddle’s assets are currently embedded within many OEM engineering organizations in support of service and owner information development.  The company offers EDI integration with OEM manufacturing for access and analysis of vehicle build data and also enables management of OEM workflows in support of marketing, legal and engineering approval of content.

Nearly gone is the physical owner’s manual, to be replaced by on-board systems already in the market from Chrysler, GM, BMW, Tesla and others allowing consumers to access vehicle information directly on board or off-board from a call center.  Tweddle claims market leadership in developing, managing and delivering relevant information to owners via multiple media channels including print, Web, mobile and in the vehicle.

Much of Tweddle’s work is visible in Chrysler’s Uconnect and Toyota’s Entune connectivity systems.  But Tweddle is preparing for the next stage in its evolution by enhancing and deepening the connections between OEMs, dealers and customers.  By broadening access to vehicle information Tweddle is giving new life to owner's manuals even as it is rendering physical manuals unnecessary.

February 22, 2013 18:11 rlanctot

Best Buy is kicking its Commercial Division automotive aftermarket efforts into overdrive in 2013 with plans to more than double the number of major metro areas covered from 12 to 27.  For the past two years Best Buy has been working with AddOnAuto to build an auto dealer-focused program of vehicle upgrades around a cloud-based platform capable of matching any car with a nearly comprehensive catalog of compatible accessory gear including everything from mud flaps to navigation systems.

The program is unique for a variety of reasons including the fact that it encompasses most aftermarket stereo brands and integrates the installer capabilities of Best Buy’s own 3,000-strong Geek Squad.  Most notable is that the program only includes products that cannot be shopped in retail stores or online, which is one reason for Sony not being included since the company lacks a two-tier program.

The program is operated by Best Buy’s Commercial Division and targets fleet, insurance and car dealer markets.  But the insurance program, for replacing stolen or damaged equipment, is not yet up and running and the dealer program is by-far the largest business segment. 

Kicked off in Boise, ID, more than two years ago, Best Buy’s mobile electronics program for dealers provides a subscription-based, Web portal where dealers and their customers can browse for compatible aftermarket products and even see what a sample vehicle will look like following installation.  The subscription is $450/month.  The portal replaces physical catalogs or more generic online ordering systems that lacked the car-level detail and visualization tools.

The program is currently operating in Los Angeles, Phoenix, Atlanta, Miami and Minneapolis among other markets.  AddOnAuto is separately recruiting dealers with a less robust offering, but the company claims in its promotional materials that 9 out of 10 consumers buy accessories for their new cars; six out of 10 spend as much as $1,500 per car; but that auto dealers capture only 10% of this business, even though 75% of consumers tell AddOnAuto that they’d prefer to buy from their dealer.

Best Buy will also provide sales training, marketing support and sales tools along with free concierge pick-up and delivery, according to company literature.  The group was recruiting dealer participation at the recent National Automobile Dealer Association convention in Orlando with a discounted subscription offer of $149/month.  Aftermarket mobile electronics suppliers contacted by Strategy Analytics confirmed the success and high expectations for the program thus far.  Best Buy representatives declined to share program revenue information.

February 21, 2013 03:44 rlanctot

“Fasten your seatbelts, it’s going to be a bumpy night.” – Margot Channing as played by Better Davis in “All about Eve”

It is the evening before my test drive of Tesla’s new Model S, the $100,000 sedan intended to change everyone’s thinking about what an electric vehicle can be or do.  But what the car can be or do is secondary to the impact the company is having on the automobile industry.

What is interesting is that Tesla’s impact has almost nothing to do with the car itself, but it is important to first understand how the car itself is influencing industry thinking about infotainment systems, safety and connectivity.

My test drive tomorrow in Washington, DC, follows an impromptu test drive last week in Silicon Valley.  I did not have the nerve to drive the car, which was privately owned, instead experiencing the naked, neck-snapping EV aggression from the comfort and safety of the passenger seat.

The Model S is a coiled spring capable of reaching 60mph in 4.4 seconds.  Along with that speed comes balance and poise with extra attention paid to steering and suspension. 

Of course, in the automotive infotainment industry the Model S has garnered attention for its 17” center stack display and embedded connectivity.  The display is impressive and the system’s access to streaming audio or Internet radio content sources via the embedded modem is the ultimate in convenience.  (Every competing system in the market accesses the driver’s mobile phone and data plan to deliver these services.)  The wireless access is free for the first three months and Tesla has yet to announce the pricing or pricing tiers thereafter.

More impressive than the convenient access to content, though, is the provision for over-the-air software updates – a capability that Tesla appears prepared to liberally leverage to its advantage.  In fact, the 17” display facilitates the process by detailing the latest software updates to the driver as they occur – usually overnight with the customer’s approval.  (Since first introducing the capability, Tesla has shifted to conducting initial download tests on the marketing fleet before deploying to consumers.)

The embedded modem also allows Tesla to monitor vehicle performance at all times, as was reflected in the recently disputed NYTimes review of Tesla's new East Coast fast-charging network intended to enable a gas-free, electrified journey from Washington, DC to Boston.  Setting aside the details, CEO Elon Musk's use of vehicle data to question the claims of the reviewer regarding his speed and use of HVAC was a revelation to some.  But, as a company representative clarified later to me, Tesla does NOT gather location information, only performance data.  And the customer opt in is purely binary - yes or no - and, with no location data, clearly does not encompass probe data for enhancing traffic information.

There are shortcomings to the Model S infotainment system which are readily apparent from a short drive.  The user interface – tends to default to a vehicle information screen.  Often featured prominently is a Google map which, while driving, may pixilate or disappear entirely based on the quality of the wireless connection.  This is a bit surprising given the fact that Audi has been out for two years already with AudiConnect consistently displaying Google Earth imagery over the Nokia Navteq map thanks to 2GB of cache memory.  Of course, Audi and Tesla currently share a lack of automatic crash notification capability.  (Tesla execs say they have yet to figure out a solution for replacing Google maps for the launch in China.)

What is missing in the homegrown head unit of the Model S, which is based on Linux, is a personalized experience that anticipates the driver’s needs and preferences and/or anticipates driving information needs such as traffic or weather data.  While multiple content aggregators have demonstrated interfaces fusing multiple inputs into a user interface capable of actively anticipating the contextual information needs and wants of the driver, Tesla appears to have put its entire emphasis on vehicle information management and map illustration.

Yet, even in its presentation of map information the Model S lacks 3D graphics or even Audi’s Google Earth.  Also missing is a more advanced safety portfolio leveraging sensors and cameras.  Company representatives say a more advanced safety offering is in the works and the center console display is ideally suited and prepared for such an integration.

But these “complaints” are quibbles, especially in the context of a car that can be transformed overnight by software updates.  The Model S I drove in last week may actually be different, by now, from the Model S I drive tomorrow.

But the real impact of Tesla lies in its distribution and service strategy.  Tesla is selling its cars from more than 22 stores nationwide and has won its first battle with traditional automobile dealers as a Massachusetts court dismissed a lawsuit brought by the Massachusetts State Automobile Dealers Association (MSADA).  The lawsuit claimed that Tesla was in violation of Massachusetts law governing the sales and servicing of cars.

The National Automobile Dealer Association has indicated its intent to support the MSADA’s efforts to challenge Tesla’s sales model setting up an ongoing clash between the massively influential and politically connected NADA and Tesla, which is backed by a combination of deep pockets, green technology cachet and its own political connections.

At a time when antipathy between North American automobile dealers and OEMs is at a peak around the question of facilities standardization and modernization strategies, Tesla presents a disruptive approach to vehicle sales that aligns well with the growing retailing mantra of the Apple Store.  In fact, as part of the NADA’s Phase II report on factory image programs focused on showroom modernization and standardization, the association’s consultant noted Apple’s stores as a touchstone for future store design.  (Tesla hired Apple's former VP of real estate, George Blankenship more than two years with precisely this objective in mind.)

It is no secret that car makers have been trying to steal a few pages from Apple’s playbook with “genius bars” popping up in Hyundai showrooms and with Ford, BMW and GM all adding more in-store personnel/sales counselors to explain new vehicle systems.  But if Tesla is successful in defending its right to sell cars from company-owned stores, a no holds barred struggle could emerge between OEMs and independent dealers in North America.

Further challenging the traditional model is the fact that Tesla showrooms are divorced from the vehicle servicing function.  Vehicles are serviced by independent agents dispatched directly to visit customers.  Tesla has indicated plans, at least in Massachusetts, to open a service location separate from its store, but even this concession is viewed by MSADA as either a violation or a compromise of the law governing vehicle franchises which must have service on-site.  (Tesla is showing its cars in a mall in Natick, Mass.)

So, Tesla is disrupting the automotive market in a number of ways such as:

Including the cost of the embedded wireless service in the cost of the vehicle – though reserving the right to charge for this at some point in the future

Delivering Internet radio and streaming audio via the embedded modem

Delivering seemingly unlimited and endless software updates over the embedded modem

Developing vehicle systems almost entirely “in-house” with only limited support from traditional industry suppliers

Servicing the cars using independent agents

But, most importantly, selling the cars via company owned stores and with little or no service component - since there is almost nothing to service.

With all of the attention paid to Google’s self-driving cars in the past year, one might have concluded that Google was the most disruptive force in the industry.  In fact, it is Tesla that is rocking Motown, Munich, Tokyo et. al. with its fresh-baked, homegrown approach to automotive marketing.

In comparison to Tesla, Google is a virtual lapdog doing everything it can to play nice with car makers offering up Google Maps, POIs, Google Earth, Google Search and even Android as tools for vehicle development.  Even the Google car is seen as nothing more than a marketing platform for Google technology intended for sale to the industry.

Tesla is taking no prisoners and tipping its hat to no conventions as it continues to hit or surpass its own financial and production targets.  The company is selling cars with 25% margins in a market where new internal combustion engine driven cars are sold with single digit margins and dealers hope to make up the revenue on service.  And, like Google, Tesla is sharing its powertrain development with Toyota (RAV4 EV) and Daimler - which provided Tesla with a steering wheel for the Model S.

What should OEMs do?

It is not too late for car makers to update their dealer franchise strategies and business models.  Among the steps that ought to be considered is giving dealers greater flexibility around the manner in which facilities upgrades are funded and approved.  Car makers should recognize the important customer interface role played by dealers and work to lower their costs of doing business (ie. reduce the expenses associated with diagnostic hardware and software) and give dealers access to vehicle data derived from telematics systems.

Independent dealers need to be viewed by car makers as important allies in connecting with consumers.  It is time to put aside the adversarial relationship that is undermining the customer interaction – a relationship that is essential to improving customer satisfaction scores and retention.

It is inevitable that OEMs – particularly in the luxury segment - will seek to open showrooms to match Tesla’s high profile market presence.  But these measures should go hand in hand with supporting the existing independent dealer network.  Whether or how the OEMs choose to walk this tightrope remains to be seen.  In the meantime, Tesla will be opening soon in a mall near you

*A final note on the Model S infotainment system: The car comes with access to Slacker and TuneIn Radio via the embedded modem, an industry first.  Additional apps will require Tesla approval before being implemented.  The system also allows for Web browsing.  More importantly, the nature of the configuration suggests an upgrade path focused on software rather than hardware, since the 17" display consumes so much of the space normally reserved for a more traditional center stack.  Not all drivers will be pleased with the 17" display, which tends to wash out in bright sunlight, but it is fairly stunning at night.  The navigation feedback in the display is supplemented with instrument cluster guidance.  Some customers will be tempted to rip out the standard 17" display and start from scratch - but most will be too jazzed by the car's performance to much care about that kind of radical automotive surgery.